Foreign financial instruments (securities) have been permitted for broad placement and trading in the Russian Federation.
LEGAL UPDATE No. 31.
Goltsblat BLP advises that Federal Law of 28 April 2009 No. 74-FZ “On Amendments to the Federal Law “On the Securities Market” and Article 5 of the Federal Law ‘On Protection of the Rights and Legitimate Interests of Investors on the Securities Market’” (the Federal Law) has been adopted and comes into effect on 16 May 2009.
The Federal Law virtually lifts the restrictions on placement of and public trading in the Russian Federation in the securities of most foreign issuers.
Trading in foreign financial instruments as securities of foreign issuers is permitted provided they have been allotted relevant international codes and are classed as securities in the manner established by the Russian Securities Market Authority. Bills of exchange, cheques, bills of lading and other such securities issued in accordance with foreign law can be circulated in Russia without these conditions being observed.
The range of foreign issuers whose securities may be placed and (or) publicly traded in Russia has been broadened substantially. These are now:
foreign organisations incorporated in member states of the Organisation for Economic Co-operation and Development (OECD), member states or observers of the Financial Action Task Force on Money-laundering (FATF) or member-states of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL);
foreign organisations incorporated in states having authorities (organisations) with which the Russian Securities Market Authority has concluded co-operation agreements;
international financial institutions listed by the Government of the Russian Federation;
the above foreign states or their central banks.
The Federal Law establishes that securities of foreign issuers can be:
placed in the Russian Federation – on condition of registration of the securities prospectus by the Russian Securities Market Authority;
publicly traded in the Russian Federation – on the condition that a Russian stock exchange has resolved on trading in these securities, provided they (with the exception of securities of international financial institutions) have been listed on a foreign stock exchange included on the list approved by the Russian Securities Market Authority and can, in accordance with the national laws of the foreign stock exchange, be offered to an unrestricted group of persons.
Foreign issued securities that cannot be publicly traded by decision of a Russian stock exchange may, on the basis of its application, be publicly placed and (or) publicly traded in Russia by resolution of the Russian Securities Market Authority. Such a decision is made on the condition that, in accordance with the national laws of the foreign issuer, the securities can be offered to an unrestricted group of persons and the liquidity ratios and investment risk indicators on these securities are no worse than those of securities of the relevant types already traded on the Russian stock exchange. At the same time, a decision is taken to register the securities prospectus of the foreign issuer.
The Federal Law determines the procedure for depositaries to record rights to securities of foreign issuers in the event of their public placement and (or) public trading in the Russian Federation.
Foreign financial instruments not classed as securities, as well as foreign issued securities not placed publicly or not traded in Russia, cannot be offered by advertisement or any other means to an unrestricted group of persons. The given securities are subject to the same restrictions as those imposed on trading in securities intended for qualified investors (brokers, dealers, credit and insurance institutions, investment and non-governmental pension funds, their managing companies, etc.). For such investors, said securities may be traded on the Russian stock exchange in accordance with its rules complying with the regulatory acts of the Russian Securities Market Authority.
The Federal Law also establishes the procedure for submission of the requisite applications and documents, the grounds for suspension and renewal of placement of foreign issued securities, and the requirements on information disclosure.
The provisions of the Federal Law “On the Securities Market” pertaining to the procedure for issuing securities and the stages in this process do not apply to relations associated with placement of foreign issued securities in Russia.
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